The Karnataka Electricity Regulatory Commission (KERC) has issued its generic tariff order for solar power projects. The order is applicable from July 1, 2025, to June 30, 2026. The tariffs apply to MW-scale ground-mounted, distributed solar photovoltaic (DSPV), and rooftop solar projects.

Tariffs Approved for 2025-26

The final approved tariff for MW-scale ground-mounted solar power projects is ₹3.07 (~$0.035)/kWh. For non-domestic DSPV consumers, the tariff is ₹3.08 (~$0.035)/kWh. For domestic consumers installing systems with a capacity of 1 kW to 10 kW, the tariff is ₹3.86 (~$0.044)/kWh, excluding subsidy.

Consumers eligible under the PM Surya Ghar: Muft Bijli Yojana will receive subsidized tariffs based on system size: ₹2.30 (~$0.026)/kWh for 1 kW to 2 kW systems, ₹2.48 (~$0.028)/kWh for systems between 2 kW to 3 kW, and ₹2.93 (~$0.034)/kWh for systems above 3 kW.

The benchmark capital cost for tariff determination is ₹40,000 (~$465.12)/kWh for domestic DSPV, ₹30,000 (~$348.84)/kWh for other DSPV projects, and ₹32.15 million (~$373,837)/MW for MW-scale projects.

The Commission had proposed the tariffs in March this year.

Terminology Change

The Commission has replaced the term “Solar Rooftop Photovoltaic” with “Distributed Solar Photovoltaic” (DSPV) projects. This category now includes rooftop systems, ground-mounted systems using elevated structures with a minimum ground clearance of eight feet, facade-mounted installations, and systems covered under virtual net metering (VNM) and group net metering (GNM).

These systems can be installed on residential, institutional, or commercial buildings, provided compliance with local building bylaws and safety regulations is ensured.

Metering Mechanisms and Open Access Benefits

Under the VNM model, consumers of the same category, such as those in residential apartments or government buildings, can use a single solar system to offset consumption across multiple electricity connections. The energy injected into the grid will be compensated for at 75% of the applicable generic tariff.

Smart meters will be mandatory at both the generation and consumption ends. Consumers will be exempt from open access charges if the consumption is confined within the same distribution transformer or 11 kV feeder.

In the GNM model, an individual with multiple connections under the same name can link them under a single solar installation. This facility will be subject to the condition that these individuals have a minimum project size of 5 kW, and that at least 20% of the generated energy is consumed at the source connection. Unutilized units are forfeited. Smart meters will also be mandatory under this model.

Application and PPA Process

The Commission simplified the process for domestic low-tension (LT) consumers installing DSPV systems up to 150 kW by exempting them from signing a power purchase agreement (PPA). For systems exceeding 150 kW, KERC prescribed a standardized process with fixed timelines for site verification, PPA execution, inspection, and final commissioning.

Distribution licensees will face penalties for failing to complete their tasks within five days of consumer work completion. In cases where delays impact commissioning, the benefit of deemed generation will be extended to the consumers.

Connectivity Guidelines

Consumers can use either static or digital meters with communication modules, or opt for smart meters for solar generation metering, effective July 1, 2025. Battery energy storage systems (BESS) are not mandated due to high capital costs and low adoption rates of rooftop solar energy systems.

Installations are permitted up to 100% of the sanctioned load with a tolerance limit of 10% for systems under 10 kW. Procurement from empanelled vendors is not compulsory. Connectivity is permitted at the LT level for capacities up to 150 kW and at the 11 kV high tension level for projects with capacities between 150 kW and 2 MW.

Tariff Computation Parameters and Capital Cost

The financial standards adopted by KERC include a useful life of 25 years, a debt-to-equity ratio of 70:30, an interest rate on debt of 11.1% over a 13-year tenure, a return on equity of 14%, and a working capital interest rate of 11.5%.

Operations and maintenance costs will be ₹791.31 (~$9.20)/kW for DSPV and ₹594,000 (~$6,906)/MW for ground-mounted systems, with an annual escalation rate of 5.72%. Depreciation is fixed at 5.38% annually for DSPV and 6.064% for megawatt-scale projects for the first 13 years.

The capacity utilization factor is fixed at 19% for all project categories, with an auxiliary consumption allowance of 0.25% for MW-scale systems only. No degradation factor is applied.

Relocation and Flexibility

The Commission has allowed consumers to relocate their solar installations within the same distribution companies’ area without requiring any amendment to the PPA, provided the sanctioned load remains unchanged. It also allowed open access consumers to opt for net or gross metering. Electricity supply companies will not compensate any excess energy injected under net metering in a billing month, and it will be treated as free power.

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